Average spending in the federal workers' program grew at 7.1 percent annually per enrollee, higher than the 5.8 percent growth rate for traditional
Medicare -- excluding the drug program -- over the decade ending in 2010, according to data analyzed at KHN's request. The analysis, based on ten-year
averages, was done by Walton Francis, a consultant and principal author for 30 years of the Consumers' Checkbook Guide to Health Plans for Federal
Employees.
In addition, the analysis found that spending growth in the federal workers' program far exceeded the rate at which Ryan proposes to cap Medicare each year -- the increase in the nation's economic growth plus half a percentage point. Had federal workers' benefits been indexed to that rate, "there's no question ... [it would] have constrained spending or increased premium costs of participants," Francis said.
More significant cost control has been achieved by the Medicare prescription program, which relies on private plans to provide seniors with drug benefits.
Since its start in 2006, the program's spending growth has been 30 percent less than initially projected by the Congressional Budget Office.
The reasons for that are intensely debated, however. Some attribute it to the structure of the program, in which multiple plans compete for enrollees , giving insurers strong incentives to hold down costs. "The cost they've come up with is far less than anyone
predicted," GOP presidential nominee Mitt Romney said on Meet The Press on September 9. "Look, competition works."
Others point to an increase in the use of less costly generic drugs, and a slowed pipeline of new brand-name drugs, which have held drug spending
nationwide at historically low levels.
"The most important factor has been the large number of popular drugs that have gone off patent and become generics," which are less expensive, said Jack
Hoadley, a researcher at Georgetown University's Health Policy Institute who studies Medicare. The blockbuster cholesterol-lowering drug, Lipitor, for instance, went off patent in 2011.
How We Got Here
For most of the last 50 years, health care spending, both by government and private programs, has grown an average of 2.5 percent points faster than GDP
each year, according to federal data. Spending has slowed recently, partly because economic difficulties have led people to put off elective medical care.
Medicare now consumes about 15 percent of the federal budget. With 10,000 baby boomers retiring every day,
pressure on the program's finances is expected to intensify and both political parties have offered options to curb the cost increases.
The Democrats' approach, enacted in the 2010 health law, relies heavily on financial incentives to spur greater efficiencies from providers. The law also
reduces annual payment increases to hospitals and other providers, as well as payments to private Medicare Advantage plans. As a backstop, beginning in
fiscal 2015, if Medicare spending exceeds 1 percentage point above the nation's economic growth rate, also called gross domestic product, an expert panel
must propose reductions in spending. Premium increases and benefit cuts would be off limits. If Congress fails to enact an alternative, the board's
recommendations would be put in place.